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KPMG Shows How Aerospace Industry Should Respond to Recession

KPMG Shows How Aerospace Industry Should Respond to Recession

Erica deVry, Staff Reporter

KPMG recently launched a market report titled, “Adapt, Survive and Thrive in Turbulent Times — The Aerospace and Defense Industry’s Response to the Economic Downturn”. The report explains that many of the big players were already prepared to tackle the situation when the recession occurred.

Marty Philips, the Global Head of Aerospace and Defense for both KPMG and its US-based partner, sought to explain it, saying, “Many A&D companies were actually prepared for the coming storm. Lean manufacturing principles, just-in-time inventory systems, performance-based supplier agreements are an established way of life for an industry well versed in the strategies needed to survive previous economic downturns. The industry also has reserves. It should be remembered that business was booming for almost a decade and revenues increased by 95 percent between 2001 and 2007 and the cash position for many A&D companies remains strong.”

KPMG’s report states that A&D companies have switched to restructuring strategies to stay afloat in these troubling times by carrying out mergers & acquisitions, managing internal consolidations and canceling acquisitions, all in a desperate attempt to improve the figures on balance sheets and to avoid losses as much as possible.

Managing Director Aerospace & Defense KPMG, Business Performance Services KPMG in the U.S., Phil Duke, commented, “The supply chain adapts quickly to changes at the prime level caused by government policy changes. Many times, suppliers can improve their cash flow by adopting aggressive working capital policies instead of simply raising prices. Accordingly, the combination of reduced prices and a skillful balance of on-shore versus off-shore sourcing, while satisfying ‘Buy America‘ provisions, can help suppliers remain competitive. Strategic sourcing is not just for prime contractors — suppliers can also benefit from implementing strategic sourcing initiatives.”

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